Even as the ceasefire between the United States and Iran was being repeatedly breached, the Iran war showed something that the world appears to have forgotten: military force, by itself, cannot be a solution unless it is followed by a political settlement — whether in Ukraine, Gaza, Lebanon, Sudan or Iran. The last four years of relentless bombardment, bloodshed, and the killing of innocent civilians and children with impunity have exposed the reality that none of the major powers seriously pursued the option of negotiations. In fact, many have been either directly involved in acts of aggression or have actively supported them through the supply of arms and financial assistance. However, the growing stalemate in almost all major conflicts underscores a fundamental truth: a political resolution is the only way forward if the major powers are to preserve what remains of their dignity.

An uneasy path to fragile peace

Restarting a full-scale war with Iran had become untenable for the U.S. after setbacks on both the strategic and political fronts, and equally untenable for Iran after reverses on the military, economic and leadership fronts. Both sides were ultimately compelled to negotiate. However, for Israel, which had initially encouraged the U.S. to start this war, any deal with Iran that fell short of regime change was unacceptable — and remains so — because of Iran’s continued support for a much-weakened Hezbollah in Lebanon, which Israel still regards as a direct threat. With Israeli elections due in October 2026, a ceasefire on the Lebanon front is politically unpalatable for Prime Minister Benjamin Netanyahu and his coalition. Iran, meanwhile, has become more assertive, by directly targeting Israeli interests and U.S. assets in the Gulf even when Hezbollah was attacked. Until recently, the pattern had been the reverse, with Iran’s proxies retaliating whenever Iran was targeted.

The much-awaited digitally signed U.S.-Iran deal reflects the reality that Iran has had a strategic win. Reports indicate that it opens up Hormuz Strait unconditionally, halts the war on all fronts including Lebanon, lifts Iranian oil sanctions, unfreezes Iranian assets and commits Iran not to produce nuclear weapons.

Negotiations to commit Iran to suspend nuclear enrichment and give up enriched nuclear material without being dubbed a repackaged Obama-era 2016 Joint Comprehensive Plan of Action (JCPOA), will take place over 60 days. In some ways the deal is not yet a political settlement, but the beginning of one.

Lest anyone romanticise Iran’s strategic gains, they do not alter the fundamental reality that Iran will continue to be viewed as a major disruptor in West Asia. There is little indication that its reliance on non-state actors such as Hezbollah, the Houthis and Iraqi militias will diminish. The Iranian government is now more hardline, its missile arsenal will be replenished, and it retains the capability to threaten the Strait of Hormuz and strike Gulf countries at will. The region is unlikely to be any safer after a deal than it was before.

This is precisely why U.S. President Donald Trump’s ‘Make America Great Again’ (MAGA) base was pushing him to get a better deal. Mr. Trump’s push to get the Saudis, Qataris and others to join the Abraham Accords to normalise relations with Israel made no headway since Israeli attacks were unrelenting in Gaza, the West Bank and Lebanon.

Even now, after the deal, Israel has sworn to keep the territories it has captured in Lebanon and expand Israeli settlements in the occupied West Bank. Iran is apprehensive, for good reason, that the U.S. or Israel will derail the deal at the first sign of stalled negotiations or a Hezbollah attack. Israel, meanwhile, has accused the U.S. of selling it out because none of its key objectives have been achieved, conveniently overlooking its own role in urging the U.S. into the conflict.

Gulf fault lines exposed

The Gulf countries have also come out the worse off. They bet on a U.S. security umbrella, signed bilateral Abraham Accords with Israel sidelining historical regional conflicts, shed the conservative tag (like Saudi Arabia), invested in a hi-tech future and joined important global groupings such as BRICS, signalling their increasing ambitions as middle powers. Those ambitions have been rudely shaken and their fragilities exposed.

The Gulf states need to return to the drawing board. They overestimated their collective economic and security strength while underestimating their internal divisions and long-standing rivalries.

The post-war landscape has exposed these fault lines: Saudi Arabia and the United Arab Emirates (UAE) have worked at cross-purposes in Yemen, Sudan and Somalia, the Emiratis have left the Organization of the Petroleum Exporting Countries — a clear signal that Saudi writ on energy policy is over. Their supply chains have to be reworked to overcome a future Hormuz blockade. They will face a growth slowdown after the war impacting their ambitions. While the UAE has moved closer to Israel and the U.S., others have adopted a more cautious approach. Ironically, the Iran war has divided the Gulf rather than united it against a common adversary, making a recalibration of relations with Washington inevitable. After the collapse of deterrence against Iran, no Gulf country is secure unless it forges a regional security architecture bringing Iran into the fold. The lessons of the Ukraine war should not be forgotten. Europe expanded the North Atlantic Treaty Organization’s boundaries towards Russia without bringing Moscow into a broader regional security architecture, and is now paying the price. Yet, neither Europe nor West Asia appears to have learned that lesson.

The other power shifts

Russia and China are happy to watch the U.S. get bogged down. For China, a weakened Trump is easier to manage, while the Iran war has given China a preview of what to expect if it closes the Taiwan Strait or if a well-armed smaller power is attacked by a bigger one. Although China seeks a larger role in West Asia, the Gulf remains too deeply tied to the U.S. economically and strategically for any dramatic shift. China is therefore likely to work through its “iron brother” Pakistan, which found itself in a geographical sweet spot. For Russia, meanwhile, the war only reinforces the strategic logic it has long applied to Ukraine.

India initially appeared to align with Israel and the U.S., and ignored the assassination of the Iranian Supreme Leader, Ayatollah Ali Khamenei, but quickly realised the need for a more balanced approach when Iran closed the Strait of Hormuz and threatened critical interests such as energy security and maritime trade. Close ties with Israel or the UAE are important, but taking sides in regional conflicts is not.

With growing divergences among regional powers, Pakistan’s rising role, and the possibility of greater Chinese influence in West Asia, bilateral relationships alone are insufficient. India needs a balanced regional strategy rooted in strategic autonomy and multi-alignment. Any slowdown in the Gulf will affect trade, investments, employment opportunities for Indian workers and diaspora remittances. The Chinese getting a permanent maritime foothold in that region will make it worse. More broadly, the inability of the U.S. to accommodate India within its larger strategic vision in West Asia, East Asia and the wider neighbourhood is hurting India.

The question now is whether Israel will seek to undermine the Iran deal. Will the protagonists draw lessons from this conflict, or will they embark on yet another cycle of wars in Lebanon, Cuba, Gaza and the West Bank? And, on a related note, will Pakistan’s growing proximity to the U.S. increase pressure on India to resume unconditional talks with Islamabad?

T.S. Tirumurti is a former Permanent Representative of India to the United Nations, New York, and currently Head, Steering Committee of the Deccan Centre for International Relations, Chennai

Published – June 17, 2026 12:16 am IST

The Strait of Hormuz is no longer just a geopolitical flashpoint; it has become the fault line of the global energy economy. As tensions in West Asia continue to disrupt shipping through one of the world’s most critical maritime corridors, countries across the globe are confronting a harsh reality: energy security is now inseparable from geopolitics. For India, which depends on imports for the overwhelming majority of its crude oil needs, the crisis has exposed both the strength of recent policy interventions and the limits of shielding consumers indefinitely from market realities.

The immediate impact of the conflict has been visible in global crude markets. Brent prices have surged sharply amid fears of prolonged disruption to Gulf supplies, while freight costs and marine insurance premiums have climbed to multi-year highs. Shipping routes are being diverted around the Cape of Good Hope, extending delivery timelines by weeks and significantly increasing transportation expenses. Global gas markets, too, remain under pressure following disruptions linked to the shutdown of key liquefied natural gas export infrastructure in Qatar. Despite this turbulence, the crisis has not hit Indian consumers as ferociously as it should be so far. Petrol and diesel prices at Indian fuel pumps have remained relatively stable, hovering near ₹95 per litre in many cities, even as fuel prices in several advanced economies rose steeply, by about 25% on average. Petrol prices in Germany and the United Kingdom have crossed the equivalent of roughly ₹220 and ₹204 per litre, respectively, while Hong Kong continues to record some of the world’s highest fuel prices at nearly ₹291 per litre. This stability is not a coincidence. It has been achieved through an extraordinary combination of state intervention, supply diversification, and financial absorption by public sector oil companies.

Comment | India’s green transition still runs on coal

Interventions that come at a steep cost

Over the past few years, India has quietly built a more resilient energy architecture. The country expanded its sourcing basket beyond the Gulf, increased strategic reserves, and strengthened ties with suppliers in Russia, the United States, West Africa, and the Atlantic basin. Union Petroleum Minister Hardeep Singh Puri recently reiterated that India’s crude supply position remains secure despite disruptions around the Strait of Hormuz, pointing to the country’s growing ability to source oil from non-Gulf origins and maintain refinery throughput at high levels.

Taking advantage of the exit of the United Arab Emirates (UAE) from the Organization of the Petroleum Exporting Countries, India signed an agreement with the UAE to store 30 millions of crude oil in India’s Strategic Petroleum Reserve. The government’s response since the latest escalation has been swift. Refineries were directed to maximise LPG production to meet rising domestic demand, especially given the dramatic expansion of cooking gas access under the Ujjwala scheme. LPG connections in India have risen from roughly 14.5 crore in 2014 to more than 33 crore today, fundamentally transforming household energy consumption patterns. Gas allocation was prioritised for households, public transport networks, and fertilizer plants to avoid cascading disruptions across essential sectors. Domestic LPG production was reportedly increased by nearly 50% during the peak of the crisis response, while all 25 fertilizer plants continued receiving around 70% of their gas requirements to maintain agricultural supply chains. Naval deployments in the Gulf of Oman, diplomatic engagement with multiple countries, and efforts to secure alternative shipping arrangements underline how seriously India has treated the crisis. These measures have bought the country valuable time. But they have also come at a steep cost.

Also Read | Why India’s generation adequacy plan needs a clear counterfactual 

Pressures on oil firms

India’s state-run Oil Marketing Companies (OMC) are now operating under enormous financial stress, selling fuel below market-linked costs in order to protect consumers from inflationary shocks. Mr. Puri recently indicated that under-recoveries could rise sharply if elevated crude prices persist, with some estimates placing daily losses near ₹700 crore-₹800 crore during peak volatility. The government has already reduced excise duties and imposed temporary export restrictions on refined fuels to retain supplies within the domestic market.

This strategy may be politically prudent in the short term, but is economically difficult to sustain over a prolonged period. Energy subsidies of this scale eventually strain public finances, weaken the balance sheets of oil companies, and distort market signals that encourage efficient energy consumption.

The larger challenge is that India’s vulnerability is structural, not temporary. Nearly every major sector of the economy — transport, logistics, aviation, manufacturing, agriculture, and fertilizers — remains heavily dependent on imported fossil fuels. Even if India succeeds in avoiding immediate shortages, it cannot remain permanently insulated from a prolonged global energy shock.

There are already signs that the government recognises this reality. Prime Minister Narendra Modi’s appeals for responsible energy use — including reducing unnecessary travel, conserving fuel, and encouraging remote work where feasible — reflect an administration preparing the public for a period of prolonged uncertainty. Such messaging would have seemed extraordinary only a few years ago. Today, it appears pragmatic. There is a strong argument for calibrated correction. India has managed inflation relatively effectively over the past decade compared to many major economies, creating some room for a measured increase in petroleum prices without triggering runaway inflation. Consumer Price Index inflation remained comparatively moderate in early 2026 — at around 3.2% to 3.5% through the first four months of the year — suggesting that limited price rationalisation may still be economically manageable. A gradual pass-through of global energy costs would reduce the fiscal burden on the state, stabilise oil marketing companies, and encourage more responsible consumption patterns.

For now, India has demonstrated remarkable agility in navigating one of the most serious energy disruptions in modern history. Supplies remain stable, panic has been avoided, and the government has managed to shield ordinary citizens from the worst immediate consequences.

Editorial | Unlearnt lessons: On India’s inadequate strategic petroleum and gas reserves

The realities of a new energy era

But energy shocks of this scale eventually demand economic realism. The true cost of fuel cannot be deferred forever. India’s challenge is no longer merely surviving the crisis; it is preparing the public and the economy for a world in which energy security will remain fragile, contested, and deeply political for years to come.

Recent reports suggest that Indian refiners continue to diversify sourcing aggressively even as global analysts warn that a prolonged Hormuz disruption could widen India’s fiscal deficit and weaken the rupee. That should serve as a reminder that the situation is not a temporary headline cycle. It marks the beginning of a new energy era — one in which resilience, diversification, and conservation will matter as much as diplomacy itself. The government has raised petroleum product prices several times, cumulatively by about 7%. Yet, this piecemeal approach neither matches international crude oil prices adequately nor meaningfully reduces the burden on OMCs. Reports suggest that OMCs continue to incur losses of ₹700 crore to ₹800 crore a day, and that only an additional 13% hike, beyond the existing 7%, would eliminate these losses. It has also been reported that the government has returned to adjusting fuel prices in line with fluctuations in international crude oil prices. However, frequent revisions create uncertainty for consumers trying to manage household and business budgets. Instead of incremental increases, the government should implement a one-time price hike of at least 13% on petroleum products, including petrol, diesel, and aviation turbine fuel. Such a move, though difficult, would reduce uncertainty, stabilise OMC finances, and allow prices to remain steady until there is a significant shift in global crude prices.

Thiruvannathapuram S. Ramakrishnan is a public policy expert

Published – May 27, 2026 12:56 am IST

The UAE’s actual announcement took observers by surprise’
| Photo Credit: AFP